Investors' confidence in the balance

Tuesday, January 30th 2001, 6:24AM

The last quarter of 2000 shows investors are readjusting their return expectations to more modest levels after a tough year for investors, according to the latest ASB Bank Investor Confidence Survey.

Overall investor confidence continued to decline for the December quarter, the proportion of respondents who expect their returns to be lower next year now almost matching the proportion that expect their returns to improve.

The net difference between the two levels is just 2%, compared to a net 7% who expected improved returns in the September 2000 survey.

"Over the last 12 months the proportion of people who believe their net returns will improve has dropped from 32% to 24%, while the proportion of people who believe their returns will decline has risen from 11% to 22%. With the net difference between these two groups is just 2%, it shows that increasingly investors see the modest returns of the past year continuing."

The survey, which canvasses 600 investors nationwide, shows managed funds remain the favoured form of investment with 24% of respondents, almost identical to the previous quarter of 25%.

"During the difficult investment conditions of last year, diversified managed funds were able to help shelter investors from some of the worst declines in sharemarkets. The survey suggests that investors will stay with their managed fund strategies and this is an encouraging signal as managed funds are about long-term investing, rather than looking for short term gain," he said.

Investors are continuing to anticipate a tough time ahead in property markets, with only 13% of investors expecting residential investment property to provide the best returns in the next 12 months, it's lowest level since the survey began two years ago.

"Residential investment property isn't as popular as it has been. We have had an overhang of supply, and little new demand from net migration. In this environment, it is unlikely that a fall in interest rates will re-ignite this market.

"The next 12 months will be an important time for investors. Returns from investment could well continue at modest levels for some time yet. It is important that investors do not react by chopping and changing their investments, possibly taking unreasonable risks, in the search for higher returns."

"As long as they are assured that they are in an appropriate investment strategy for their goals, and a qualified investment advisor could assist to confirm this, then they should stick by their strategy through these more difficult investment times," he says.